ETrade Makes Move From Clicks to Bricks

Acquisition makes brokerage No. 3 ATM operator

Online brokerage ETrade Group Inc. stepped firmly onto bricks and mortar last week, acquiring an automated teller machine (ATM) network with 8,500 locations to become the third-largest ATM operator in the U.S.

ETrade's deal for Portland, Ore.-based Card Capture Services Inc. -- the largest independent network of centrally managed ATMs -- is part of a growing trend in which Internet-only banks find alliances or acquisitions that give them real-world access to customers.

Virtual banks, such as ETrade's Telebank unit, have been handicapped by a lack of branches and ATMs, analysts said. ETrade merged in January with Arlington, Va.-based TeleBanc Financial Corp. and was the first Internet-only bank to reach $3 billion in retail consumer deposits this month.

"Telebank hasn't had a widespread growth in accounts and assets to the extent of the traditional banks," said Larry Tabb, an analyst at TowerGroup in Needham, Mass. "Most people look for a bank that has a large number of branches and ATMs, so when they want to make a deposit, they can."

ETrade said the acquisition will overcome one of the last barriers to widespread adoption of Internet banking.

ETrade, in Palo Alto, Calif., said it will use the ATMs to create a network of financial services kiosks that offer users access to all of its financial services, such as stock trading.

"Now three of the major Internet-only banks have their own physical capability," said George Barto, an analyst at Gartner Group Inc. in Stamford, Conn.

In addition to ETrade's Telebank, New York-based American Express Co.'s Membership Banking and Chicago-based Bank One Corp.'s WingspanBank.com give their customers access to ATM networks.

Barto said ETrade will rejigger the way the ATM network makes money because ATM fees may not be around forever.

In fact, ETrade said it plans to offer everything from cash withdrawals and deposits starting this summer to stock trading on its new ETrade-branded ATMs. These ATMs generate more than 3.1 million transactions per month and are located in hotels, shopping malls, grocery stores and gas stations.

The world's first virtual bank is also expanding into bricks and mortar. Montreal-based Royal Bank of Canada, owner of Atlanta-based Internet-only S1 Corp., made an offer to buy Chicago-based Prism Financial Corp., which has 159 retail branches.

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